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Written by Joe Khurana

What Happens When You Don’t Know the Value of Your IP?

value of intellectual propertyThe typical enterprise organization can hold thousands of patents, with dozens added each year. This intellectual property has the power to produce revenue for the company, create barriers to entry for competitors, and mitigate risks from other patent holders. Of course, patents also give the holder a temporary monopoly, during which time they can overtake competitors and gain tremendous market share.

With the immense power intellectual property gives any company, it seems as though constant maintenance and evaluation would be the norm. In fact, many businesses have no idea what the value of their IP is. They’re unaware of how much money they might be losing out on each and every year.

A lack of knowledge can affect your bottom line in several different ways. Let’s examine what could happen if you don’t know the value of your IP.

Lose Proprietary Market Advantage 

Understanding the power of the patents in your portfolio helps you attain and maintain market advantage. Consider Amazon, which patented the one-click purchasing method for its ecommerce site. Now, several other companies have employed a similar tool on their ecommerce sites, perhaps through licensing deals with Amazon or, perhaps, through a lack of understanding or knowledge about the risk they face in using patented technology.

Were this patent simply sitting in a file somewhere gathering dust, Amazon may have missed out on the chance to file an infringement suit against Barnes & Noble when the struggling bookseller attempted to incorporate the one-click model into their own ecommerce website. Instead, they took quick and decisive action to protect the market share they’d gained when edging Barnes & Noble out of the picture with their ecommerce model.

Put Technology and Business Methods at Risk

We can look to this same technology from Amazon to put this particular point to the test, too. Yes, other online competitors use the one-click method that Amazon has patented, and Amazon has certainly exercised its right to file infringement suits against many of them. Those suits have served to preserve their market share, as we examined with Barnes & Noble, but they also serve to protect the technology and business methods of Amazon.

Another example might be Dell, which used its patents in a cross-licensing deal with IBM for $16 billion. They first had to understand the value of their patents before they could even attempt this type of deal, which is point number one. That knowledge helped them create this deal, which frees Dell from paying tens of millions in royalties while also receiving components at a lower cost. The savings over time has helped Dell also keep their pricing competitive. In effect, an understanding of their IP valuation helped them protect their business method.

Lose Branding Effectiveness

While we’ve mentioned Gillette before regarding their loss of market share to direct-to-consumer razors from companies like Harry’s and Dollar Shave Club, it’s important to note that their intellectual property has been a shield for them in the past.

Their use of patents helped them build and sustain an immense hold over the razor market for decades—to the point that Gillette became synonymous with razors. By building a wall around their product, they were able to slow their competitors to the point that duplication became nearly impossible.

The only way for any company to begin taking some of that market share was to find a new way to do business—not a new way to make razors. Which brings us to the next point.

Blind to Competitor Disruption and Market Shifts

When we did discuss Gillette’s loss of market share to online razor distributors, we talked about how they might have avoided the problem with some advance knowledge of what intellectual property had been applied within their industry. When Dollar Shave Club came along and started chipping away at the market share, Gillette filed suit. But they were fighting the wrong battle.

By the time they were able to catch on to the real fight, the razor subscription service, they were too late. Just like Blockbuster before it.

If you’re unaware of your current intellectual property holdings, you don’t even know what to look for in the technology landscape. You can’t make connections between the prior art you’ve cited and that cited by another patent holder. Without those connections, you stand at risk of being blindsided by disruptors and competitors—and then your valuable IP is no longer of use.

Increased Maintenance Costs

So, we’ve discussed the many ways a lack of knowledge about your company’s IP value could bring risks that lead to loss of revenue and market share. Let’s talk about what happens when those patents you don’t even plan to use sit dormant.

Why would you continue to maintain intellectual property that you never intend to use? You could monetize those patents by licensing or selling to make room for technology that does benefit your business. You could also use the knowledge of your IP to pursue infringement against companies that have been using your intellectual property for their own gain. The question is: which patents are worth keeping so that you could fight, and which would serve you better by letting go?

Without a deep understanding of the value of your IP, you may never know. And you’ll also never know the amount of money you’re letting slip through your fingers on a daily basis.

If you’d like to explore the value of your company’s intellectual property and patent holdings, give us a call. We can quickly and effectively score every patent in your portfolio to give you a starting point. From there, we can help you determine the best uses for your company’s patents.

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Categories: Patent Cost, Patent Analysis, IP Monetization